GBP and EUR Exchange Rates

By Tom Higham

28th November, 2013

UK Housing Market

Today the Financial Policy Committee will release its bi-annual report on financial stability in the UK and it is expected to outline the current threat posed to the UK by the housing market. The main concern is that house prices are rising too fast and the increase is unsustainable which could cause another property bubble which may burst. It is well known that in the UK there is a lot of money tied up in houses as society in this country almost dictates that people should get on the housing ladder at all costs and so any changes in house prices can have a large impact on the economy and therefore Sterling exchange rates. For example, while house prices are rising people are more likely to want to sell their property to make the most of their strong house price and with more house sales going through it results in more funds moving through the economy which is good for growth. However, should house prices rise too fast and then the property bubble bursts we could see thousands of people struggling to keep up with mortgage payments on properties which are in negative equity. This is why there is a real concern that property prices should rise at a slower pace.

One of the main areas of concern is that the Government has introduced the help to buy scheme which is encouraging more people to buy properties and, according to some, is artificially inflating property prices. There is currently a debate as to whether the Bank of England can intervene and slow down the housing market or even whether they can veto the Government’s Help to Buy scheme. Should we see the Bank of England try and over rule a government policy then we may see some real uncertainty in the markets and as a result could cause some Sterling weakness. So, todays report will make for very interesting reading. If you would like to find out about the report or the impact it has on the exchange rates call us today on 0800 328 5884.

Greece to Remain in Recession

The Organisation for Economic Co-operation and Development (OECD) have stated that the Greek economy will shrink yet again, making it a seventh consecutive year the struggling country will be in recession, however this does contradict what the Greek government are forecasting. The OECD expects a contraction of 0.4% next year while the Greek government are forecasting a 0.6% growth. There is a chance that Greece will need yet more financial help even though they have been receiving financial assistance since 2010 and the OECD believe that regardless of the loans that Greece will continue to struggle well up into 2020. So, with Greece back in the headlines we could see yet more uncertainty in Europe, this coupled with possible further interest rate cuts could lead to a lot more pressure on the Euro and therefore some excellent opportunities for those clients looking to buy Euros.

If you need to transfer funds internationally then speak to one of our experienced currency brokers who will be happy to discuss your currency requirements and the different contract options that are available all so that you can make an informed decision as to when to convert your currency. You can call straight through to our trading floor for free on 0800 328 5884 or alternatively you can email me directly on trh@currencies.co.uk

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